Introduction to the financial world
This presentation is the property of its rightful owner.
Sponsored Links
1 / 18

Introduction to the Financial World PowerPoint PPT Presentation


  • 85 Views
  • Uploaded on
  • Presentation posted in: General

Introduction to the Financial World. Corporate Finance 2. The financial world. Explain the role of the financial manager Detail the value of financial intermediaries Show an appreciation of the function of the major financial institutions and markets. Primitive and modern economies.

Download Presentation

Introduction to the Financial World

An Image/Link below is provided (as is) to download presentation

Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author.While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server.


- - - - - - - - - - - - - - - - - - - - - - - - - - E N D - - - - - - - - - - - - - - - - - - - - - - - - - -

Presentation Transcript


Introduction to the financial world

Introduction to the Financial World

Corporate Finance 2


Introduction to the financial world

The financial world

  • Explain the role of the financial manager

  • Detail the value of financial intermediaries

  • Show an appreciation of the function of the major financial institutions and markets


Introduction to the financial world

Primitive and modern economies

Exhibit 1.14 Flows within a simple economy – production level

Exhibit 1.15 Flows within a simple economy – production level plus money


Introduction to the financial world

Flows within a modern economy

Exhibit 1.16 Flows within a modern economy


Introduction to the financial world

The role of the financial manager

Exhibit 1.17 The flow of cash between capital markets and the firm’s operations


Introduction to the financial world

The financial manager plays a pivotal role in the following:

  • Interaction with the financial markets

  • Investment

  • Treasury management

  • Risk management

  • Strategy


Introduction to the financial world

The flow of funds and financial intermediation

Exhibit 1.20 The flow of funds and financial intermediation


Introduction to the financial world

The flow of funds and financial intermediation

  • Primary investors

  • Ultimate borrowers

  • Conflict of preferences


Introduction to the financial world

Savings into investment in an economy without financial intermediaries


Introduction to the financial world

The introduction of financial intermediaries

  • Brokers

  • Asset transformers

    • Risk transformation

    • Maturity (liquidity) transformation

    • Volume transformation

  • Intermediaries’ economies of scale

    • (a)Efficiencies in gathering information

    • (b)Risk spreading

    • (c)Transaction costs

  • Financial markets


Introduction to the financial world

Savings into investment in an economy with financial intermediaries and financial markets


Introduction to the financial world

Growth in the financial services sector

  • Reasons for growth of financial services in the UK

    • 1High income elasticity

    • 2International comparative advantage

Exhibit 1.24 Main features of change in financial services


Introduction to the financial world

The financial system: the banking sector

  • Retail banks

  • Wholesale banks

    • Raising external finance for companies

    • Broking and dealing

    • Fund management (asset management)

    • Assistance in corporate restructuring

    • Assisting risk management using derivatives

  • International banks

    • Foreign banking

    • Eurocurrency banking

  • Building societies

  • Finance houses


Introduction to the financial world

The financial system: long-term savings institutions

  • Pension funds

    • The long time horizon of the pension business means that large sums are built up and available for investment – currently over £800bn

  • Insurance funds

  • General insurance

  • Life assurance

    • Term assurance, whole-of-life policies,

    • Endowment policies, annuities

  • Life assurance companies have over £900bn under management


Introduction to the financial world

The financial system: the risk spreaders

  • Unit trusts

  • Investment trusts

  • Open-ended investment companies (OEICs)


Introduction to the financial world

The financial system: the markets

  • The money markets

  • The bond markets

  • The foreign exchange markets (Forex or FX)

  • The share markets

  • The derivative markets


Introduction to the financial world

Lecture review 1

  • Financial institutions and markets

  • Financial managers

  • Financial institutions

  • Asset transformation

  • Intermediaries and economies of scale

  • Secondary markets

  • Financial services sector


Introduction to the financial world

Lecture review 2

  • The financial system

  • The banking sector

  • Long-term savings institutions

  • The risk spreaders

  • The markets


  • Login